Gas price hike may not be retrospective, says govt

The government may not implement the delayed increase in price of natural gas with retrospective effect as it would be difficult to back charge higher bills from power and CNG consumers, an official said.

A new price for all domestically produced gas, based on a formula suggested by a panel headed by C Rangarajan, was to have come into effect from April 1 but was delayed due to the general elections. The revised rate is yet to be announced as the new government applies its mind to the issue.

“Natural gas is mainly used for manufacturing fertiliser, generating electricity and producing CNG. Since the new price announcement was deferred, gas was sold at the old rate of $4.2 per million British thermal units.

“This price was used to calculate the rate at which urea was sold to farmers, power to households and CNG to automobiles. Now if the gas price is to be revised with retrospective effect, from April 1, then how will you back charge the users who have already consumed electricity or CNG,” a top government official said.

Retrospective implementation of the new gas price may not pose a problem for the fertiliser sector if the government agrees to proportionately increase the subsidy payout for the period beginning April 1.

Applying the same principle to power producers and CNG retailers would be difficult because the central government does not provide any direct subsidy to them.

At the assumed new rate of $8.4, the cost of power will jump to Rs 6.40 per unit from Rs 2.93 a unit currently.

It would translate into an increase of at least Rs 8 per kg in retail CNG rates.

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